Municipal fiber needs more FDR localism, fewer state bans

Op-ed: Community-owned broadband is one way to bring fiber to smaller markets …

How frustrating to be the mayor of a small town without good broadband access today. Imagine trying to entice businesses or entrepreneurs to a region where the best Internet option is the slow DSL most of us discarded nearly a decade ago for faster speeds.

The “broadband market” in much of the US happily provides snail-speed connections at inflated prices when compared to many of our peer nations. Cable and telephone companies see little reason to upgrade these networks—the low population density does not lend itself to quickly recovering investments.

Recognizing the disconnect between the best interests of distant shareholders and the best interest of their community, cities across the US have built their own networks, taking a page from the thousands of small cities that built their own electricity networks a century ago when private utilities ignored them.

Lafayette, Louisiana is a good example. The city begged its incumbents to beef up local broadband networks and was rebuffed. This Cajun country community decided to build its own next-generation network. The incumbents argued that the households and businesses of Lafayette had all the broadband they needed and sued to stop the city. This year, after years of litigation, the victorious city began connecting customers to LUS Fiber.

LUS Fiber may offer the best broadband value in the country, offering a true 10Mbps symmetrical connection for $29/month. Those wanting the 50Mbps symmetrical connection have to pony up just $58/month—about what I pay to my cable provider in Saint Paul for "up to" 16/2 speeds.

Unsurprisingly, the cable incumbent has now decided Lafayette is a priority and will be upgraded to DOCSIS 3.0 to offer faster tiers.

Barriers

Lafayette and Monticello were lucky because they had the power to build a digital network. Many communities do not. The Institute for Local Self-Reliance, where I am a researcher, compiled a basic map of the United States showing states that have enacted barriers to these community networks.

Municipal networks restriction map

Eighteen states impose some barriers to community broadband. Texas, Arkansas, Missouri, and Nebraska have an outright ban. Other states erect administrative and procedural hurdles that make it difficult for communities to invest in a full-service network. Though Monticello and Lafayette have succeeded in spite of barriers, many other communities are unable to persevere, and watch their younger generation leave for modern opportunities elsewhere.

As I’ve already noted, communities have fought this fight before—when electricity was only available to the urban and affluent. Profit-maximizing companies not only refused to build the grid to low-profit areas but argued those areas should not be permitted to wire themselves. Fortunately, FDR saw things differently:

I therefore lay down the following principle: That where a community—a city or county or a district—is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable basic right, as one of its functions of Government, one of its functions of home rule, to set up, after a fair referendum to its voters has been had, its own governmentally owned and operated service.

We need FDR to remind us that we are discussing the basic right of a community to invest in its future. Communities must not be held hostage by an absentee company that knows it can overcharge and under-invest without consequence.

Wireless is nice for mobility, but does not threaten the wired monopoly or duopoly. These networks—particularly full fiber-optic networks—are natural monopolies. There is no natural “market” any more than one could imagine a competitive market in streets or metro airports. This is infrastructure—the foundation for many other markets.

Are public networks a failure?

Why then, do one in three states discourage community-owned networks? Telecommunications companies—particularly those awash in revenues from mobile phones—can throw an overwhelming number of contributions, lobbyists, and “think tank” reports at legislators to convince them to ban or restrict publicly owned networks. Few legislators have a background in telecom and those that do typically come from industry.

Christopher Mitchell

Industry-funded think tanks have produced many reports claiming publicly owned networks are failures. Their methodology is suspect—equating long-term investments in next-generation networks with lost money. Using this methodology, any homeowner who fails to completely pay off his mortgage within a few years has failed.

The truth is that publicly owned networks do quite well. Communities typically borrow from outside investors to build the network and pay off the loans over a 15-20 year period with revenues from phone, television, and broadband services (for wired networks). These networks have eased telecom budgets (e.g. by increasing speed to schools while dramatically cutting costs) and encouraged economic development. Nationally, they average high take rates—a measure of how many people take service on the network.

State barriers to publicly owned broadband networks may benefit monopolistic cable and telephone companies but can cripple communities within those states. Of course, such policies also give a competitive edge to cities in other states who have moved ahead.

“Actually,” says Lafayette’s Republican Mayor, Joey Durel, “I often say with tongue firmly planted in cheek that I hope that the other 49 states do outlaw what we are doing. Then I will ask them to send their technology companies to Lafayette where we will welcome them with open arms and a big pot of gumbo.”

97 Reader Comments

It's already being paid for with tax dollars and right-of-way. That's why these telcos and cable companies should shut the hell up and build out according to their customers' needs instead of simply maximizing their profits.

Not necessarily. Verizon's Fios build is self funded, and was the largest capital investment of any company in the nation last year. So, under your premise, the Govt now has the right to claim ownership of this network. This isn't "commerce regulation", you are talking about government takeover of privately owned assets.

It's called Eminent Domain, and the gov't does it all the time. So they can take my house, to widen a public street, but they can't take a fiber optic network?

Originally posted by 3power:There are plenty of providers in the country.

That's absolutely pointless unless a person is able to get service from all those providers. In my area, the cable is run by Comcast. Good luck switching to Time Warner or some other cable provider. No competition.

Can you get Direct TV? Dish? Fios TV?

You won't get a dedicated network built in every community by every provider. That would not be cost effective for ANY business.

But if the community owned the infrastructure, any provider could come in and use it. Hence, more competition.

I like how you ignore the fact that Verizon's coffers have been enriched by taxpayer money in a variety of ways, not least of which is the Telecom act you keep trying to dismiss as "decade old tax credits".

I give up. Please enlighten me on how the Telcom Act of 1996 enriched the telcos' coffers.

Look, I can't help you understand if you can't even be bothered to read a link posted in direct response to your arguments on the previous page. Hell, you've even quoted it.

Oh, and stop ignoring the various other subsidies that Verizon and the other telcos and cable companies receive. Right-of-way has been mentioned a ridiculous number of times, for example.

Did you even read the book that your precious link is referencing? You seem to think that is the only authority on the subject. It is a book written by an analyst with an obvious spin. Seriously, look at the number of homes in the "proposals" that are cited (exhibit x) It's such a small number as to be insignificant. Anyway, we have digressed.

Regarding the original article - would a municipality actually build the network, or would it be outsourced? After thinking about it, it is kind of ridiculous for the Feds to ban any local government from such a thing.

The right of ways that are being mentioned benefit the entire community. Think of all the jobs that are provided when a network is built and maintained. It is in a community's best interest to make business possible.

The right of ways that are being mentioned benefit the entire community. Think of all the jobs that are provided when a network is built and maintained. It is in a community's best interest to make business possible.

Your comment is absolutely true, and it is one of the main reasons local governments have every right to build their own networks if they want to. However, no matter how many times you try to ignore it, the use of public land for free is still a public subsidy of their efforts. Land costs money and they aren't paying any. End of story. Whether its in the people's best interest is completely immaterial to whether its a subsidy or not.

These companies have received tax benefits and extra concessions (relating to their monopoly status) with the agreement that they would build a high speed network which they failed to deliver. Further, they continue to use the public domain while feeling free to screw the public and abuse their monopoly position. Just fucking give up already - you are wrong.

Originally posted by ajsteven:Your comment is absolutely true, and it is one of the main reasons local governments have every right to build their own networks if they want to. However, no matter how many times you try to ignore it, the use of public land for free is still a public subsidy of their efforts. Land costs money and they aren't paying any. End of story. Whether its in the people's best interest is completely immaterial to whether its a subsidy or not.

That's a weak way to state it. The entire PURPOSE of subsidies is to invest in something that will benefit the people. Save for corruption (which is by definition abuse of the system), subsidies ALWAYS serve the public good.

That's a weak way to state it. The entire PURPOSE of subsidies is to invest in something that will benefit the people. Save for corruption (which is by definition abuse of the system), subsidies ALWAYS serve the public good.

I agree completely, I'm chose my wording to make 3power understand that despite his continued whining, Verizon is depending on a public subsidy to build out their network.

Originally posted by 3power:Regarding the original article - would a municipality actually build the network, or would it be outsourced? After thinking about it, it is kind of ridiculous for the Feds to ban any local government from such a thing.

The Feds didn't (and show no significant interest in doing so, near as I can tell). State governments have done so, however, and none of the 'government regulation is always bad' crowd seems to think that these regulations are a terrible imposition, in stark contrast to how they start throwing around the word 'coercion' whenever government tries to regulate those corporations or provide services that citizens desire.

Next you'll be telling us that if we were real men, we'd all be canceling our internet service if we aren't happy with it, instead of attempting to use the coercive power of government to unjustly stifle business; and probably with a straight face and not a thought in the world about how completely insane such advice is.

Still, Ironman2008 seems to be on vacation still, so someone has to carry the 'business is always right' torch until he gets back...I guess.

Can someone explain to me how these muni-networks work. Just so you know a little about my situation... I live in rural Georgia where there are very few competitors in internet access and the mobile space. Is there a way my city/ county can pull off this type of network (TV, mobile, Broadband, etc) and even oneday turn a profit from it?

I haven't been able to find references to this idea, but what if the local gov't built out conduits everywhere, including three to each property, and then leased those to the ISPs/carriers? I know this would be too expensive for many locations, but what about the idea in principal?

This would fit with the analogy that the government builds the roads, while commerce rolls the goods. The conduits (or utility poles, if necessary) would be government-owned infrastructure, while the cables/fiber/dump trucks full of packets could come and go as technology and service-providers cycle through their relevancy.

Originally posted by 3power:Did you even read the book that your precious link is referencing?

Yes, did you?

quote:

You seem to think that is the only authority on the subject. It is a book written by an analyst with an obvious spin.

It really doesn't matter; you can't handwave away the core subject. Anyone can see that there was a substantial stimulus for fiber layout. And the telcos pocketed the money and sat on their hands for several years.

Think about that the next time you start claiming that Verizon's FIOS buildout is self-funded.

quote:

The right of ways that are being mentioned benefit the entire community. Think of all the jobs that are provided when a network is built and maintained. It is in a community's best interest to make business possible.

You say that as if anyone strenuously objects to right of way. All we're saying is that it's a tangible government-bestowed benefit that saves businesses money (i.e., a subsidy).

Originally posted by jaquinton:Can someone explain to me how these muni-networks work. Just so you know a little about my situation... I live in rural Georgia where there are very few competitors in internet access and the mobile space. Is there a way my city/ county can pull off this type of network (TV, mobile, Broadband, etc) and even oneday turn a profit from it?

I'd suggest reading up on Lafayette, La.'s situation. Possibly contacting the city itself for information on how they did it. There are other towns that have also tried this (I believe one was in Minnesota?), but can't remember them off the top of my head.

Originally posted by 3power:Regarding the original article - would a municipality actually build the network, or would it be outsourced? After thinking about it, it is kind of ridiculous for the Feds to ban any local government from such a thing.

The right of ways that are being mentioned benefit the entire community. Think of all the jobs that are provided when a network is built and maintained. It is in a community's best interest to make business possible.

This is what I'm seeing it as. No company owns the "pipes" to the houses and businesses, thus no company is out the investment. However, any ISP is free to connect and offer their service to the residents of the municipality while the city/town maintains the cabling, much like how roads are maintained.

Originally posted by jaquinton:Can someone explain to me how these muni-networks work. Just so you know a little about my situation... I live in rural Georgia where there are very few competitors in internet access and the mobile space. Is there a way my city/ county can pull off this type of network (TV, mobile, Broadband, etc) and even oneday turn a profit from it?

I'd suggest reading up on Lafayette, La.'s situation. Possibly contacting the city itself for information on how they did it. There are other towns that have also tried this (I believe one was in Minnesota?), but can't remember them off the top of my head.

Monticello, MN is the city, I think. They got sued to a stand-still by the local telecom (not one of the national ones either) and while they won the suit after 3 years, by then the telecom had already installed their own fiber network, and just to add insult to injury pointed out that the assumptions made in the original municipal business case no longer held and that the city's rollout might not be good business. The Monticello business plan is available online, I think, so it's probably worth looking at how they did the job.

@jacinton: if your municipality is the first in Georgia to do this, plan on getting sued, is all I can say.

Originally posted by jaquinton:Can someone explain to me how these muni-networks work. Just so you know a little about my situation... I live in rural Georgia where there are very few competitors in internet access and the mobile space. Is there a way my city/ county can pull off this type of network (TV, mobile, Broadband, etc) and even oneday turn a profit from it?

I'd suggest reading up on Lafayette, La.'s situation. Possibly contacting the city itself for information on how they did it. There are other towns that have also tried this (I believe one was in Minnesota?), but can't remember them off the top of my head.

Monticello, MN is the city, I think. They got sued to a stand-still by the local telecom (not one of the national ones either) and while they won the suit after 3 years, by then the telecom had already installed their own fiber network, and just to add insult to injury pointed out that the assumptions made in the original municipal business case no longer held and that the city's rollout might not be good business. The Monticello business plan is available online, I think, so it's probably worth looking at how they did the job.

@jacinton: if your municipality is the first in Georgia to do this, plan on getting sued, is all I can say.

If I lived in Monticello, I'd be so pissed at the telecom that I'd go with the municipal net even if it was more expensive, and work to convince others to do so as well. While it may not be in my interests to pay more, it's certainly in my interests to ensure that companies like that aren't rewarded for fucking over the city.

Originally posted by jaquinton:Can someone explain to me how these muni-networks work. Just so you know a little about my situation... I live in rural Georgia where there are very few competitors in internet access and the mobile space. Is there a way my city/ county can pull off this type of network (TV, mobile, Broadband, etc) and even oneday turn a profit from it?

I'd suggest reading up on Lafayette, La.'s situation. Possibly contacting the city itself for information on how they did it. There are other towns that have also tried this (I believe one was in Minnesota?), but can't remember them off the top of my head.

Monticello, MN is the city, I think. They got sued to a stand-still by the local telecom (not one of the national ones either) and while they won the suit after 3 years, by then the telecom had already installed their own fiber network, and just to add insult to injury pointed out that the assumptions made in the original municipal business case no longer held and that the city's rollout might not be good business. The Monticello business plan is available online, I think, so it's probably worth looking at how they did the job.

@jacinton: if your municipality is the first in Georgia to do this, plan on getting sued, is all I can say.

If I lived in Monticello, I'd be so pissed at the telecom that I'd go with the municipal net even if it was more expensive, and work to convince others to do so as well. While it may not be in my interests to pay more, it's certainly in my interests to ensure that companies like that aren't rewarded for fucking over the city.

Aye, same here. It's petty, but I'm the type that can't let that kind of asshattery get rewarded. Kind of the "cut off your own nose to spite your face" thinking.

Correct. And, in the example given in the article (Lafayette), the corporation lost. No doubt because the city officials had records showing their repeated attempts to get better service only to be rebuffed.

Still, where would the corporation find argument if the local municipality decided to lay down the fiber and open it to anyone that wished to compete for the residents' dollars?

Nobody said it had to make sense for them to sue. They just throw lawsuits at the problem to see what sticks.

Folks; The role of government (municipal, state/provincial or federal) is to keep things honest (stop laughing, seriously, that's what they're supposed to do). When a company gets greedy the gov't is supposed to step in, slap some hands and shove em back in the right direction.

If, however, private enterprise outright refuses to operate fairly, then the gov't has an obligation to step in and provide services to the public. In an ideal world, they would do that until private enterprise can take over, without the need of a public option.

Much as I hate to bring up the health care stuff, but it is exemplary of this type of system: When you're sick, a doctor should first check your pulse, not your credit. What is happening in health care (in the US) is that private enterprise got too greedy, focusing mostly on 'profitable patients' instead of sick patients. Current gov't stepping in is a correction, not a permanent solution.

This is the same with broadband: It is now a commodity level service. As mentioned in the article, however whole towns and cities are at a *huge* disadvantage if the best they can offer the whole region is one or two megabits per second when 50 km away, another city is offering 10 or even 20. This isn't even looking at the global scale, where many cities and even countries in Europe are offering fifty or a hundren megabits per second.

If I were a business that required my employees to have high speed access from their homes and offices, I wouldn't even look at North America and I am saying that even as a proud Canadian, but from a business perspective, both our countries are *decades* behind in what should be proper broadband policy. Gov't needs to look at the city, state and country as a whole's benefits; Not just those of the stockholders of (insert major telco/cableco here)